Alexandria Real Estate Equities, Inc. Reports: 3Q24 and YTD 3Q24 Net Income per Share - Diluted of $0.96 and $2.18, respectively; and 3Q24 and YTD 3Q24 FFO per Share - Diluted, as Adjusted, of $2.37 and $7.08, respectively

Rhea-AI Summary

Alexandria Real Estate Equities (NYSE: ARE) reported its 3Q24 and YTD 3Q24 financial results. Key highlights include a 10.9% increase in total revenues for 3Q24 to $791.6 million and a 9.3% increase YTD to $2.33 billion. Net income per diluted share was $0.96 for 3Q24 and $2.18 YTD. Adjusted FFO per diluted share was $2.37 for 3Q24 and $7.08 YTD. The company maintained a high occupancy rate of 94.7% and collected 99.9% of 3Q24 tenant rents and receivables.

ARE declared a 3Q24 dividend of $1.30 per share, yielding 4.4%. The company has significant liquidity of $5.4 billion and expects to fund capital requirements through property sales. Recent transactions include the sale of a property for $150 million and lease renewals worth 117,479 RSF with Fred Hutchinson Cancer Center. ARE's development pipeline is expected to deliver incremental annual net operating income of $510 million by 1Q28.

Positive

• 10.9% increase in total revenues to $791.6 million for 3Q24.
• Adjusted FFO per diluted share increased to $2.37 for 3Q24.
• High occupancy rate of 94.7%.
• Significant liquidity of $5.4 billion.
• $510 million expected incremental annual net operating income by 1Q28.

Negative

• Impairment charges of $40.9 million and $65.9 million recognized in October 2024.

Insights

Financial Analyst

Alexandria Real Estate Equities (ARE) has delivered a solid performance in Q3 2024, demonstrating resilience in a challenging market. Key highlights include:

• Total revenues increased by 10.9% year-over-year to $791.6 million
• Funds from operations (FFO) per share rose to $2.37, up from $2.26 in Q3 2023
• Occupancy remains strong at 94.7% for operating properties in North America
• Leasing volume of 1.5 million RSF in Q3, up 48% from the previous four-quarter average

The company's focus on high-quality life science real estate continues to pay off, with 76% of annual rental revenue coming from mega campuses and 53% from investment-grade or large cap tenants. ARE's development pipeline is expected to deliver significant incremental annual net operating income of $510 million primarily by Q1 2028.

However, investors should note the recent impairment charges related to property sales, which could impact short-term financial results. The company's strategy to dispose of non-core assets and reinvest in its development pipeline may provide long-term benefits but could create near-term volatility.

Real Estate Investment Specialist

Alexandria's strategic positioning in the life science real estate sector continues to yield positive results. The company's focus on AAA innovation cluster locations and collaborative mega campuses sets it apart in the REIT space. Key strengths include:

• Strong tenant base with 53% of rental revenue from investment-grade or large cap tenants
• Robust development pipeline expected to generate $510 million in incremental annual NOI
• Solid balance sheet with a net debt and preferred stock to Adjusted EBITDA ratio of 5.5x
• Attractive dividend yield of 4.4% with a conservative payout ratio of 55%

The company's capital recycling strategy, selling non-core assets to fund development, is prudent in the current market environment. However, the recent impairment charges on property sales in Boston and San Diego markets warrant attention. While these sales may optimize the portfolio long-term, they could impact near-term earnings.

Alexandria's recognition as one of the World's Most Trustworthy Companies and its sustainability awards underscore its strong corporate governance and ESG focus, which are increasingly important to investors.

PASADENA, Calif., Oct. 21, 2024 /PRNewswire/ -- Alexandria Real Estate Equities, Inc. (NYSE: ARE) announced financial and operating results for the third quarter ended September 30, 2024.

Key highlights
					YTD
Operating results	3Q24		3Q23		3Q24		3Q23
Total revenues:
In millions	$        791.6		$        713.8		$      2,327.4		$      2,128.5
Growth	10.9 %				9.3 %
Net income attributable to Alexandria's common stockholders – diluted:
In millions	$        164.7		$          21.9		$         374.5		$         184.4
Per share	$          0.96		$          0.13		$           2.18		$           1.08
Funds from operations attributable to Alexandria's common stockholders – diluted, as adjusted:
In millions	$        407.9		$        386.4		$      1,217.3		$      1,142.5
Per share	$          2.37		$          2.26		$           7.08		$           6.69

An industry-leading REIT with a high-quality, diverse tenant base and strong margins

(As of September 30, 2024, unless stated otherwise)
Occupancy of operating properties in North America		94.7 %
Percentage of annual rental revenue in effect from mega campuses		76 %
Percentage of annual rental revenue in effect from investment-grade or publicly    traded large cap tenants		53 %
Operating margin		71 %
Adjusted EBITDA margin		70 %
Percentage of leases containing annual rent escalations		96 %
Weighted-average remaining lease term:
Top 20 tenants		9.5	years
All tenants		7.5	years
Sustained strength in tenant collections:
Tenant receivables as a percentage of 3Q24 rental revenues		0.9 %
October 2024 tenant rents and receivables collected as of October 21, 2024		99.6 %
3Q24 tenant rents and receivables collected as of October 21, 2024		99.9 %

Strong and flexible balance sheet with significant liquidity; top 10% credit rating ranking among all publicly traded U.S. REITs

• Net debt and preferred stock to Adjusted EBITDA of 5.5x and fixed-charge coverage ratio of 4.4x for 3Q24 annualized (targets for 4Q24 annualized of ≤5.1x and ≥4.5x, respectively).
• Significant liquidity of $5.4 billion.
• 31% of our total debt matures in 2049 and beyond.
• 12.6 years weighted-average remaining term of debt.
• Since 2020, an average of 97.7% of our debt has been fixed rate.
• Total debt and preferred stock to gross assets of 29%.
• $1.0 billion of capital contribution commitments from existing consolidated real estate joint venture partners to fund construction from 4Q24 through 2027.

Strong leasing volume and solid rental rate changes

• Strong leasing volume aggregating 1.5 million RSF during 3Q24, up 48% compared to our previous four-quarter average of 1.0 million RSF.
• Rental rate changes on lease renewals and re-leasing of space were 5.1% and 1.5% (cash basis) for 3Q24 and 16.4% and 8.9% (cash basis) for YTD 3Q24.
• 80% of our leasing activity during the last twelve months was generated from our existing tenant base.

					3Q24			YTD 3Q24
			Total leasing activity – RSF		1,486,097			3,742,955
			Leasing of development and redevelopment space – RSF		39,121			480,342
			Lease renewals and re-leasing of space:
			RSF (included in total leasing activity above)		1,278,857			2,863,277
			Rental rate changes		5.1 %	(1)		16.4 %
			Rental rate changes (cash basis)		1.5 %	(1)		8.9 %

(1)

Includes a five-year lease extension to an investment-grade rated technology tenant aggregating 357,136 RSF of recently acquired tech R&D space in our Texas market that was renewed with rental rate changes of (33.6)% and (4.8)% (cash basis). These spaces were originally targeted for a future change in use at acquisition, but we instead renewed them with a lower capital investment while we continue to evaluate options to convert these spaces in the future, subject to market conditions. Excluding this lease, rental rate changes for renewed/re-leased space for 3Q24 were 13.0% and 2.3% (cash basis).

Attractive dividend strategy to share net cash flows from operating activities with stockholders while retaining a significant portion for reinvestment

• Common stock dividend declared for 3Q24 of $1.30 per common share aggregating $5.14 per common share for the twelve months ended September 30, 2024, up 24 cents, or 5%, over the twelve months ended September 30, 2023.
• Dividend yield of 4.4% as of September 30, 2024.
• Dividend payout ratio of 55% for the three months ended September 30, 2024.
• Average annual dividend per-share growth of 5.4% from 2020 through 3Q24 annualized.
• Significant net cash flows from operating activities after dividends retained for reinvestment aggregating $2.1 billion for the years ended December 31, 2020 through 2023 and including the midpoint of our 2024 guidance range for net cash provided by operating activities after dividends.

Ongoing successful execution of Alexandria's 2024 capital strategy

We expect to continue pursuing our strategy to fund a significant portion of our capital requirements for the year ending December 31, 2024 with dispositions primarily focused on sales of properties and land parcels not integral to our mega campus strategy. Refer to "Dispositions" in the Earnings Press Release for additional details.

(in millions)
Completed dispositions of 100% interest in properties		$      319
Pending dispositions subject to non-refundable deposits		577
Pending dispositions subject to executed letters of intent and/or purchase and sale agreements		603
Forward equity sales agreements		28
Total		$   1,527
2024 guidance midpoint for dispositions and common equity		$   1,550

Ongoing successful execution of Alexandria's 2024 capital strategy (continued)

• In September 2024, we completed the following transactions with our longstanding tenant, Fred Hutchinson Cancer Center ("Fred Hutch"), in the Lake Union submarket:
  • Sale of 1165 Eastlake Avenue East, a fully leased 100,086 RSF single-tenant Class A+ life science facility that was developed in 2021. We sold the property for $150.0 million, or $1,499 per RSF, at strong capitalization rates of 4.7% and 4.9% (cash basis). Upon completion of the sale, we recognized a gain on sale of real estate aggregating $21.5 million.
  • Fred Hutch executed early renewals aggregating 117,479 RSF at our 1201 and 1208 Eastlake Avenue East properties, including a 15-year lease extension at 1201 Eastlake Avenue East.
  • Our prior joint venture partner sold their partial interest ownership in each of 1201 and 1208 Eastlake Avenue East to Fred Hutch. Our ownership interest in both properties remains unchanged at 30.0%. This sale, lease extensions, and new joint venture affirm Fred Hutch's commitment to South Lake Union.

Alexandria's development and redevelopment pipeline delivered incremental annual net operating income of $21 million commencing during 3Q24 and is expected to deliver incremental annual net operating income aggregating $510 million primarily by 1Q28

• During 3Q24, we placed into service development and redevelopment projects aggregating 316,691 RSF that are 100% leased across multiple submarkets and delivered incremental annual net operating income of $21 million. 3Q24 deliveries included 250,000 RSF at 9820 Darnestown Road on the Alexandria Center^® for Life Science – Shady Grove mega campus in our Rockville submarket.
• Annual net operating income (cash basis) is expected to increase by $57 million upon the burn-off of initial free rent, with a weighted-average burn-off period of approximately six months, from recently delivered projects.
• 69% of the RSF in our total development and redevelopment pipeline is within our mega campuses.

		Development and Redevelopment Projects		Incremental Annual Net Operating Income		RSF		Leased/ Negotiating Percentage
		(dollars in millions)
		Placed into service:
		1H24		$                       42		628,427			100 %
		3Q24		21		316,691			100
		Placed into service in YTD 3Q24		$                       63		945,118			100 %
		Expected to be placed into service(1):
		4Q24 through 4Q25		$                     158	(2)	5,467,897			55 %
		1Q26 through 1Q28		352						(3)
				$                     510

				(1)	Represents expected incremental annual net operating income to be placed into service from deliveries of projects undergoing construction and one committed near-term project expected to commence construction in the next two years.
				(2)	Includes (i) 1.0 million RSF that is expected to stabilize through 2025 and is 92% leased/negotiating and (ii) expected partial deliveries through 4Q25 from projects expected to stabilize in 2026 and beyond. Refer to the initial and stabilized occupancy years under "New Class A/A+ development and redevelopment properties: current projects" in the Supplemental Information for additional details.
				(3)	70% of the leased RSF of our development and redevelopment projects was generated from our existing tenant base.

Continued solid net operating income and internal growth

• Net operating income (cash basis) of $2.0 billion for 3Q24 annualized, up $274.2 million, or 15.5%, compared to 3Q23 annualized.
• Same property net operating income growth of 1.5% and 6.5% (cash basis) for 3Q24 over 3Q23 and 1.6% and 4.6% (cash basis) for YTD 3Q24 over YTD 3Q23.
• 96% of our leases contain contractual annual rent escalations approximating 3%.

Strong balance sheet management
Key metrics as of or for the three months ended September 30, 2024

• $33.1 billion in total market capitalization.
• $20.5 billion in total equity capitalization, which ranks in the top 10% among all publicly traded U.S. REITs.

		3Q24				Target
		Quarter Annualized		Trailing 12 Months		4Q24 Annualized
Net debt and preferred stock to     Adjusted EBITDA		5.5x		5.6x		Less than or equal to 5.1x
Fixed-charge coverage ratio		4.4x		4.5x		Greater than or equal to 4.5x

Key capital events

• In September 2024, we amended and restated our unsecured senior line of credit to, among other changes, extend the maturity date from January 22, 2028 to January 22, 2030, including extension options that we control.
• During 3Q24, we had no activity under our ATM program. As of October 21, 2024, the remaining aggregate amount available for future sales of common stock was $1.47 billion.

Investments

• As of September 30, 2024:
  • Our non-real estate investments aggregated $1.5 billion.
  • Unrealized gains presented in our consolidated balance sheet were $166.2 million, comprising gross unrealized gains and losses aggregating $284.4 million and $118.2 million, respectively.
• Investment income of $15.2 million for 3Q24 presented in our consolidated statement of operations consisted of $23.0 million of realized gains and $2.6 million of unrealized gains, partially offset by $10.3 million of impairment charges.

Other key highlights

Key items included in net income attributable to Alexandria's common stockholders:
									YTD
	3Q24		3Q23		3Q24		3Q23		3Q24		3Q23		3Q24		3Q23
(in millions, except per share      amounts)	Amount				Per Share – Diluted				Amount				Per Share – Diluted
Unrealized gains (losses) on  non-real estate investments	$     2.6		$ (77.2)		$  0.02		$  (0.45)		$ (32.5)		$  (221.0)		$  (0.19)		$  (1.29)
Gain on sales of real estate	27.1		—		0.16		—		27.5		214.8		0.16		1.26
Impairment of non-real estate  investments	(10.3)		(28.5)		(0.06)		(0.17)		(37.8)		(51.5)		(0.22)		(0.30)
Impairment of real estate	(5.7)		(20.6)		(0.03)		(0.12)		(36.5)		(189.2)		(0.22)		(1.11)
Acceleration of stock  compensation expense due  to executive officer resignations	—		(1.9)		—		(0.01)		—		(1.9)		—		(0.01)
Total	$   13.7		$  (128.2)		$  0.09		$  (0.75)		$ (79.3)		$  (248.8)		$  (0.47)		$  (1.45)
Refer to "Funds from operations and funds from operations per share" in the Earnings Press Release for additional details.

Subsequent events

• In October 2024, we agreed to sell four properties located in our Greater Boston market for a sales price of $369.4 million to the current tenant of the properties with whom we have a long-established relationship. The sales price represents capitalization rates of 8.5% and 6.3% (cash basis) based upon net operating income and net operating income (cash basis), respectively, for 3Q24 annualized. These properties, acquired primarily during 2020–2021, are currently 100% leased with a weighted-average remaining lease term of 18 years. In October 2024, we recognized an impairment charge aggregating $40.9 million to reduce the carrying amounts of these properties by approximately 10% to the expected sales price less costs to sell. Our decision to dispose of these properties is based on their non-strategic location and the significant capital that the expected sales proceeds provide for immediate reinvestment into our development and redevelopment pipeline.
• In October 2024, we agreed to sell five operating properties aggregating 203,223 RSF and land parcels aggregating 1.5 million SF in our Sorrento Mesa and University Town Center submarkets to buyers that are expected to develop residential properties on these sites for an aggregate sales price of approximately $314.0 million. In October 2024, we recognized impairment charges aggregating $65.9 million to reduce the carrying amounts of these properties to the expected aggregate sales price less costs to sell. Our decision to dispose of these assets, which are not integral to our mega campus strategy, is primarily based on the substantial capital that the sales proceeds will provide for immediate reinvestment into our development and redevelopment pipeline.

Industry and corporate responsibility leadership: catalyzing and leading the way for positive change to benefit human health and society

• In September 2024, Alexandria was named one of the World's Most Trustworthy Companies by Newsweek. This significant distinction builds on the Company's recognition by the publication as one of America's Most Trustworthy Companies in 2023 and 2024. Alexandria is one of only three S&P 500 REITs recognized in the real estate and housing category.
• In September 2024, Alexandria and its executive chairman and founder, Joel S. Marcus, were honored with the inaugural Bisnow Life Sciences Icon & Influencer Award. This prestigious award highlights Mr. Marcus and the Company's significant long-term contributions to and lasting impact on the life science real estate sector and broader life science industry. Mr. Marcus accepted the award on his own behalf and that of Alexandria at Bisnow's International Life Sciences & Biotech Conference, where he was also the keynote speaker.
• Alexandria continued to receive broad recognition for our operational excellence in asset management, design, development, and sustainability, including the following recent awards:
  • In our Greater Boston market, the atrium at 325 Binney Street, located on the Alexandria Center^® at One Kendall Square mega campus, is a light-filled collaboration space with a terraced garden and communal staircase that was celebrated for design excellence in the Science & Research – Small (under 50,000 SF) category of the 2024 International Interior Design Association New England (IIDA NE) Design Awards and also received the award program's top honor, Best in Show.
  • In our Maryland market, we were awarded three 2024 NAIOP DC|MD Awards of Excellence for developments and enhancements on the Alexandria Center^® for Life Science – Shady Grove mega campus: 9810 and 9820 Darnestown Road for Best Life Science Facility, 9800 Medical Center Drive for Best Amenity Space, and 9950 Medical Center Drive for Best Industrial/Flex.
  • We received a 2024 Nareit Sustainable Design Impact Award for our groundbreaking approach to utilizing alternative energy sources such as geothermal energy and wastewater heat recovery systems to reduce operational greenhouse gas emissions in Labspace^® development projects in our Greater Boston and Seattle markets.
  • Alexandria GradLabs^® at 9880 Campus Point Drive, located on the Campus Point by Alexandria mega campus in our San Diego market, earned a 2024 International Institute for Sustainable Laboratories (I2SL) Lab Buildings and Projects Award for Excellence in Energy Efficiency. The state-of-the-art building was designed to operate as a highly energy-efficient research facility. In 2023, the LEED Platinum certified facility earned an I2SL Labs2Zero pilot Energy Score of 96 out of 100, indicating its operational energy performance is better than 96% of similar facilities.

About Alexandria Real Estate Equities, Inc. 

Alexandria Real Estate Equities, Inc. (NYSE: ARE), an S&P 500^® company, is a best-in-class, mission-driven life science REIT making a positive and lasting impact on the world. As the pioneer of the life science real estate niche with our founding in 1994, Alexandria is the preeminent and longest-tenured owner, operator, and developer of collaborative mega campuses in AAA life science innovation cluster locations, including Greater Boston, the San Francisco Bay Area, San Diego, Seattle, Maryland, Research Triangle, and New York City. As of September 30, 2024, Alexandria has a total market capitalization of $33.1 billion and an asset base in North America that includes 41.8 million RSF of operating properties, 5.3 million RSF of Class A/A+ properties undergoing construction, and one committed near-term project expected to commence construction in the next two years. Alexandria has a longstanding and proven track record of developing Class A/A+ properties clustered in mega campuses that provide our innovative tenants with highly dynamic and collaborative environments that enhance their ability to successfully recruit and retain world-class talent and inspire productivity, efficiency, creativity, and success. Alexandria also provides strategic capital to transformative life science companies through our venture capital platform. We believe our unique business model and diligent underwriting ensure a high-quality and diverse tenant base that results in higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value. For more information on Alexandria, please visit www.are.com.

 

Guidance September 30, 2024 (Dollars in millions, except per share amounts)

The following guidance for 2024 has been updated to reflect our current view of existing market conditions and assumptions for the year ending December 31, 2024. There can be no assurance that actual results will not be materially higher or lower than these expectations. Also, refer to our discussion of "forward-looking statements" of the Earnings Press Release for additional details.

								2024 Guidance Midpoint
Summary of Key Changes in Guidance		As of 10/21/24		As of 7/22/24		Summary of Key Changes in Sources and Uses of Capital		As of 10/21/24		As of 7/22/24
EPS, FFO per share, and FFO per share, as adjusted		See updates below				Cash expected to be held at December 31, 2024		$150		$—
Straight-line rent revenue		$147 to $162		$169 to $184
General and administrative expenses		$176 to $186		$181 to $191

Key Credit Metric Targets(1)
Net debt and preferred stock to Adjusted EBITDA – 4Q24 annualized		Less than or equal to 5.1x
Fixed-charge coverage ratio – 4Q24 annualized		Greater than or equal to 4.5x

Projected 2024 Earnings per Share and Funds From Operations per Share Attributable to      Alexandria's Common Stockholders – Diluted
		As of 10/21/24				As of 7/22/24
Earnings per share(2)		$2.60 to $2.64				$2.98 to $3.10
Depreciation and amortization of real estate assets			6.05				5.95
Gain on sales of real estate(3)			(0.38)				—
Impairment of real estate – rental properties and land(4)			0.67				0.01
Allocation to unvested restricted stock awards			(0.06)				(0.05)
Funds from operations per share(1)		$8.88 to $8.92				$8.89 to $9.01
Unrealized losses on non-real estate investments			0.19				0.20
Impairment of non-real estate investments			0.22				0.16
Impairment of real estate			0.17				0.17
Allocation to unvested restricted stock awards			(0.01)				(0.01)
Funds from operations per share, as adjusted(1)		$9.45 to $9.49				$9.41 to $9.53
Midpoint		$9.47				$9.47

								Certain Completed Items
Key Sources and Uses of Capital		Range				Midpoint
Sources of capital:
Incremental debt		$       885		$    1,185		$     1,035		See below
Net cash provided by operating activities after     dividends		400		500		450
Dispositions and common equity(5)		1,050		2,050		1,550		(5)
Total sources of capital		$    2,335		$    3,735		$     3,035
Uses of capital:
Construction		$    1,950		$    2,550		$     2,250
Acquisitions		250		750		500		$        249
Ground lease prepayment(6)		135		135		135
Cash expected to be held at December 31, 2024(7)		—		300		150
Total uses of capital		$    2,335		$    3,735		$     3,035
Incremental debt (included above):
Issuance of unsecured senior notes payable(8)		$    1,000		$    1,000		$     1,000		$     1,000	(8)
Unsecured senior line of credit, commercial paper,    and other		(115)		185		35
Net incremental debt		$       885		$    1,185		$     1,035

Key Assumptions		Low		High
Occupancy percentage in North America as of December 31, 2024		94.6 %		95.6 %
Lease renewals and re-leasing of space:
Rental rate changes		11.0 %		19.0 %
Rental rate changes (cash basis)		5.0 %		13.0 %
Same property performance:
Net operating income changes		0.5 %		2.5 %
Net operating income changes (cash basis)		3.0 %		5.0 %
Straight-line rent revenue(9)		$             147		$             162
General and administrative expenses(10)		$             176		$             186
Capitalization of interest		$             325		$             355
Interest expense		$             154		$             184
Realized gains on non-real estate investments(11)		$               95		$             125

(1)	Refer to "Definitions and reconciliations" in the Supplemental Information for additional details.
(2)	Excludes unrealized gains or losses on non-real estate investments after September 30, 2024 that are required to be recognized in earnings and are excluded from funds from operations per share, as adjusted.
(3)	Includes $37.1 million of gain on sales of real estate recognized in October 2024. Refer to "Dispositions" in the Earnings Press Release for additional details.
(4)	Includes $106.8 million of real estate impairments recognized in October 2024. Refer to "Subsequent Events" in the Earnings Press Release for additional details.
(5)	We expect to fund our remaining capital requirements for the year ending December 31, 2024 with real estate dispositions. As of October 21, 2024, we completed real estate dispositions aggregating $319.2 million, have additional pending transactions subject to (i) non-refundable deposits aggregating $577.2 million and (ii) executed letters of intent and/or purchase and sale agreements aggregating $602.5 million and forward equity sales agreements aggregating $28 million, which in aggregate, represents 98% of the $1.55 billion midpoint of our guidance range. We do not expect to issue additional equity in 2024 beyond the existing forward equity sales agreements outstanding.
(6)	In July 2024, we executed an amendment to our existing ground lease agreement at the Alexandria Technology Square® mega campus in our Cambridge submarket, which requires that we prepay our entire rent obligation for the extended lease term aggregating $270.0 million in two equal installments during the fourth quarter of 2024 and the first quarter of 2025.
(7)	The increase in cash expected to be held at December 31, 2024 is primarily due to changes in the mix and timing of pending dispositions that are subject to non-refundable deposits or subject to executed letters of intent and/or purchase and sale agreements that are expected to close in 4Q24. This cash is expected to reduce our 2025 debt capital needs.
(8)	Represents $1.0 billion of unsecured senior notes payable issued in February 2024. Subject to market conditions, we may seek additional opportunities in 2024 to fund all or a portion of the proceeds necessary for the repayment of our $600.0 million of 3.45% unsecured senior notes payable due on April 30, 2025 through the issuance of additional unsecured senior notes payable that is not assumed in our current 2024 guidance.
(9)	Reduction in the midpoint of our guidance range for straight-line rent revenue by $22 million is primarily attributable to (i) the write-off of a deferred rent receivable of $9 million related to the lease termination and a payment of $10 million from a tenant at 409 Illinois Street in our Mission Bay submarket, a 234,249 RSF property owned by our consolidated real estate joint venture for which we have an ownership interest of 25%, and (ii) a change in the expected stabilization date from 4Q24 to 1Q25 at our fully leased development project at 230 Harriet Tubman Way in our South San Francisco submarket as reported in our 2Q24 Earnings Press Release and Supplemental Information.
(10)	Reduction in the midpoint of our guidance range for general and administrative expense by $5 million is primarily attributable to the realization of savings associated with overall efficiencies, including enhanced cost control measures, incremental use of technology, streamlined processes, and optimization of execution in connection with the sale of non-core assets not integral to our mega campus strategy.
(11)	Represents realized gains and losses included in funds from operations per share – diluted, as adjusted, and excludes significant impairments realized on non-real estate investments, if any. Refer to "Investments" in the Supplemental Information for additional details.

 

Acquisitions September 30, 2024 (Dollars in thousands)

Property

Submarket/Market

Date of Purchase

Number of Properties

Operating Occupancy

Square Footage

Purchase Price

Future Development(1)

Operating With Future Development/ Redevelopment(1)

Completed in 1H24:

285, 299, 307, and 345 Dorchester Avenue (60%     interest in consolidated JV)

Seaport Innovation District/Greater  Boston

1/30/24

—

N/A

1,040,000

—

$

155,321

Other

46,490

201,811

Completed in October 2024:

428 Westlake Avenue North

Lake Union/Seattle

10/1/24

1

100 %

—

88,514

47,600

$

249,411

2024 guidance range for acquisitions

$250,000 – $750,000

(1)	We expect to provide total estimated costs and related yields for development and significant redevelopment projects in the future, subsequent to the commencement of construction.

Dispositions September 30, 2024 (Dollars in thousands)
Property		Submarket/Market		Date of Sale		Interest Sold			RSF		Capitalization Rate			Capitalization Rate (Cash Basis)			Sales Price		Sales Price per RSF
Completed in 1H24																	$          17,213
Completed in 3Q24:
Sale to longstanding tenant
1165 Eastlake Avenue East		Lake Union/Seattle		9/12/24		100 %			100,086		4.7 %			4.9 %			149,985	(1)	$          1,499
Dispositions of properties not integral to our mega campus     strategy
219 East 42nd Street		New York City/New York City		7/9/24		100 %			349,947		N/A			N/A			60,000	(2)	N/A
Other																	11,511
																	221,496	(3)
Dispositions completed in YTD 3Q24																	238,709
Completed in October 2024:
Dispositions of properties not integral to our mega campus     strategy
14225 Newbrook Drive		Northern Virginia/Maryland		10/15/24		100 %			248,186		7.6 %			7.4 %			80,500	(4)	$             324
																	319,209
Pending 4Q24 dispositions subsequent to October 21, 2024:
Subject to non-refundable deposits
Sale to longstanding tenant		Greater Boston		4Q24		100 %					8.5 %			6.3 %			369,439	(5)
Other																	207,713
																	577,152
Subject to executed letters of intent and/or purchase and sale     agreements																	602,500	(5)
																	1,179,652	(6)
																	$     1,498,861
2024 guidance range for dispositions and common equity															$1,050,000 – $2,050,000

(1)	Upon completion of the sale, we recognized a gain on sale of real estate aggregating $21.5 million.
(2)	The property was leased to a single tenant with a July 2024 lease expiration and had annual net operating income of $18.6 million based on 2Q24 annualized. This property was previously considered to be a potential development project upon expiration of the in-place non-laboratory space lease.
(3)	Dispositions completed during the three months ended September 30, 2024 had annual net operating income of $26.5 million (based on 2Q24 annualized) with a weighted-average disposition date of July 28, 2024 (weighted by net operating income for 2Q24 annualized).
(4)	Demonstrating the long-term enduring value of our laboratory facilities, Alexandria successfully operated our only asset in the Northern Virginia submarket from its acquisition in 1997 (prior to our IPO) through its sale in October 2024. Upon completion of the sale, we recognized a gain on sale of real estate aggregating $37.1 million.
(5)	Refer to "Subsequent events" in the Earnings Press Release for additional details.
(6)	Pending dispositions subsequent to October 21, 2024 have estimated annual net operating income of approximately $95.8 million (based on 3Q24 annualized) with a weighted-average non-core estimated stand-alone disposition date of December 5, 2024 (weighted by net operating income for 3Q24 annualized). Approximately half of our pending dispositions are non-core stabilized stand-alone properties with weighted-average capitalization rates of 8.5% and 7.0% (cash basis), and the remaining half are land and non-stabilized properties that have vacancy or significant near-term lease expirations that will require capital to re-tenant, including one building with approximately 72% of non-laboratory space.

Earnings Call Information and About the Company
September 30, 2024

We will host a conference call on Tuesday, October 22, 2024, at 3:00 p.m. Eastern Time ("ET")/noon Pacific Time ("PT"), which is open to the general public, to discuss our financial and operating results for the third quarter ended September 30, 2024. To participate in this conference call, dial (833) 366-1125 or (412) 902-6738 shortly before 3:00 p.m. ET/noon PT and ask the operator to join the call for Alexandria Real Estate Equities, Inc. The audio webcast can be accessed at www.are.com in the "For Investors" section. A replay of the call will be available for a limited time from 5:00 p.m. ET/2:00 p.m. PT on Tuesday, October 22, 2024. The replay number is (877) 344-7529 or (412) 317-0088, and the access code is 1168152.

Additionally, a copy of this Earnings Press Release and Supplemental Information for the third quarter ended September 30, 2024 is available in the "For Investors" section of our website at www.are.com or by following this link: https://www.are.com/fs/2024q3.pdf.

For any questions, please contact corporateinformation@are.com; Joel S. Marcus, executive chairman and founder; Peter M. Moglia, chief executive officer and chief investment officer; Marc E. Binda, chief financial officer and treasurer; Paula Schwartz, managing director of Rx Communications Group, at (917) 633-7790; or Sara M. Kabakoff, senior vice president – chief content officer.

About the Company

Alexandria Real Estate Equities, Inc. (NYSE: ARE), an S&P 500^® company, is a best-in-class, mission-driven life science REIT making a positive and lasting impact on the world. As the pioneer of the life science real estate niche with our founding in 1994, Alexandria is the preeminent and longest-tenured owner, operator, and developer of collaborative mega campuses in AAA life science innovation cluster locations, including Greater Boston, the San Francisco Bay Area, San Diego, Seattle, Maryland, Research Triangle, and New York City.  As of September 30, 2024, Alexandria has a total market capitalization of $33.1 billion and an asset base in North America that includes 41.8 million RSF of operating properties, 5.3 million RSF of Class A/A+ properties undergoing construction, and one committed near-term project expected to commence construction in the next two years. Alexandria has a longstanding and proven track record of developing Class A/A+ properties clustered in mega campuses that provide our innovative tenants with highly dynamic and collaborative environments that enhance their ability to successfully recruit and retain world-class talent and inspire productivity, efficiency, creativity, and success. Alexandria also provides strategic capital to transformative life science companies through our venture capital platform. We believe our unique business model and diligent underwriting ensure a high-quality and diverse tenant base that results in higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value. For more information on Alexandria, please visit www.are.com.

Forward-Looking Statements

This document includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, without limitation, statements regarding our 2024 earnings per share, 2024 funds from operations per share, 2024 funds from operations per share, as adjusted, net operating income, and our projected sources and uses of capital. You can identify the forward-looking statements by their use of forward-looking words, such as "forecast," "guidance," "goals," "projects," "estimates," "anticipates," "believes," "expects," "intends," "may," "plans," "seeks," "should," "targets," or "will," or the negative of those words or similar words. These forward-looking statements are based on our current expectations, beliefs, projections, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts, as well as a number of assumptions concerning future events. There can be no assurance that actual results will not be materially higher or lower than these expectations. These statements are subject to risks, uncertainties, assumptions, and other important factors that could cause actual results to differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include, without limitation, our failure to obtain capital (debt, construction financing, and/or equity) or refinance debt maturities, lower than expected yields, increased interest rates and operating costs, adverse economic or real estate developments in our markets, our failure to successfully place into service and lease any properties undergoing development or redevelopment and our existing space held for future development or redevelopment (including new properties acquired for that purpose), our failure to successfully operate or lease acquired properties, decreased rental rates, increased vacancy rates or failure to renew or replace expiring leases, defaults on or non-renewal of leases by tenants, adverse general and local economic conditions, an unfavorable capital market environment, decreased leasing activity or lease renewals, failure to obtain LEED and other healthy building certifications and efficiencies, and other risks and uncertainties detailed in our filings with the Securities and Exchange Commission ("SEC"). Accordingly, you are cautioned not to place undue reliance on such forward-looking statements. All forward-looking statements are made as of the date of this Earnings Press Release and Supplemental Information, and unless otherwise stated, we assume no obligation to update this information and expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. For more discussion relating to risks and uncertainties that could cause actual results to differ materially from those anticipated in our forward-looking statements, and risks to our business in general, please refer to our SEC filings, including our most recent annual report on Form 10-K and any subsequent quarterly reports on Form 10-Q.

This document is not an offer to sell or a solicitation to buy securities of Alexandria Real Estate Equities, Inc. Any offers to sell or solicitations to buy our securities shall be made only by means of a prospectus approved for that purpose. Unless otherwise indicated, the "Company," "Alexandria," "ARE," "we," "us," and "our" refer to Alexandria Real Estate Equities, Inc. and our consolidated subsidiaries. Alexandria^®, Lighthouse Design^® logo, Building the Future of Life-Changing Innovation^®, That's What's in Our DNA^®, Labspace^®, At the Vanguard and Heart of the Life Science Ecosystem™, Alexandria Center^®, Alexandria Technology Square^®, Alexandria Technology Center^®, and Alexandria Innovation Center^® are copyrights and trademarks of Alexandria Real Estate Equities, Inc. All other company names, trademarks, and logos referenced herein are the property of their respective owners.

Consolidated Statements of Operations September 30, 2024 (Dollars in thousands, except per share amounts)
		Three Months Ended										Nine Months Ended
		9/30/24		6/30/24		3/31/24		12/31/23		9/30/23		9/30/24		9/30/23
Revenues:
Income from rentals		$       775,744		$       755,162		$       755,551		$       742,637		$       707,531		$    2,286,457		$    2,099,819
Other income		15,863		11,572		13,557		14,579		6,257		40,992		28,664
Total revenues		791,607		766,734		769,108		757,216		713,788		2,327,449		2,128,483
Expenses:
Rental operations		233,265		217,254		218,314		222,726		217,687		668,833		636,454
General and administrative		43,945		44,629		47,055		59,289		45,987		135,629		140,065
Interest		43,550		45,789		40,840		31,967		11,411		130,179		42,237
Depreciation and amortization		293,998		290,720		287,554		285,246		269,370		872,272		808,227
Impairment of real estate		5,741		30,763		—		271,890		20,649		36,504		189,224
Total expenses		620,499		629,155		593,763		871,118		565,104		1,843,417		1,816,207
Equity in earnings of unconsolidated real estate joint ventures		139		130		155		363		242		424		617
Investment income (loss)		15,242		(43,660)		43,284		8,654		(80,672)		14,866		(204,051)
Gain on sales of real estate		27,114		—		392		62,227		—		27,506		214,810
Net income (loss)		213,603		94,049		219,176		(42,658)		68,254		526,828		323,652
Net income attributable to noncontrolling interests		(45,656)		(47,347)		(48,631)		(45,771)		(43,985)		(141,634)		(131,584)
Net income (loss) attributable to Alexandria Real Estate Equities, Inc.'s    stockholders		167,947		46,702		170,545		(88,429)		24,269		385,194		192,068
Net income attributable to unvested restricted stock awards		(3,273)		(3,785)		(3,659)		(3,498)		(2,414)		(10,717)		(7,697)
Net income (loss) attributable to Alexandria Real Estate Equities, Inc.'s     common stockholders		$       164,674		$         42,917		$       166,886		$       (91,927)		$         21,855		$       374,477		$       184,371
Net income (loss) per share attributable to Alexandria Real Estate Equities,     Inc.'s common stockholders:
Basic		$             0.96		$             0.25		$             0.97		$            (0.54)		$             0.13		$             2.18		$             1.08
Diluted		$             0.96		$             0.25		$             0.97		$            (0.54)		$             0.13		$             2.18		$             1.08
Weighted-average shares of common stock outstanding:
Basic		172,058		172,013		171,949		171,096		170,890		172,007		170,846
Diluted		172,058		172,013		171,949		171,096		170,890		172,007		170,846
Dividends declared per share of common stock		$             1.30		$             1.30		$             1.27		$             1.27		$             1.24		$             3.87		$             3.69

 

Consolidated Balance Sheets September 30, 2024 (In thousands)
		9/30/24		6/30/24		3/31/24		12/31/23		9/30/23
Assets
Investments in real estate		$  32,951,777		$  32,673,839		$  32,323,138		$  31,633,511		$ 31,712,731
Investments in unconsolidated real estate joint ventures		40,170		40,535		40,636		37,780		37,695
Cash and cash equivalents		562,606		561,021		722,176		618,190		532,390
Restricted cash		17,031		4,832		9,519		42,581		35,321
Tenant receivables		6,980		6,822		7,469		8,211		6,897
Deferred rent		1,216,176		1,190,336		1,138,936		1,050,319		1,012,666
Deferred leasing costs		516,872		519,629		520,616		509,398		512,216
Investments		1,519,327		1,494,348		1,511,588		1,449,518		1,431,766
Other assets		1,657,189		1,356,503		1,424,968		1,421,894		1,501,611
Total assets		$  38,488,128		$  37,847,865		$  37,699,046		$  36,771,402		$ 36,783,293
Liabilities, Noncontrolling Interests, and Equity
Secured notes payable		$       145,000		$       134,942		$       130,050		$       119,662		$       109,110
Unsecured senior notes payable		12,092,012		12,089,561		12,087,113		11,096,028		11,093,725
Unsecured senior line of credit and commercial paper		454,589		199,552		—		99,952		—
Accounts payable, accrued expenses, and other liabilities		2,865,886		2,529,535		2,503,831		2,610,943		2,653,126
Dividends payable		227,191		227,408		222,134		221,824		214,450
Total liabilities		15,784,678		15,180,998		14,943,128		14,148,409		14,070,411
Commitments and contingencies
Redeemable noncontrolling interests		16,510		16,440		16,620		16,480		51,658
Alexandria Real Estate Equities, Inc.'s stockholders' equity:
Common stock		1,722		1,720		1,720		1,719		1,710
Additional paid-in capital		18,238,438		18,284,611		18,434,690		18,485,352		18,651,185
Accumulated other comprehensive loss		(22,529)		(27,710)		(23,815)		(15,896)		(24,984)
Alexandria Real Estate Equities, Inc.'s stockholders' equity		18,217,631		18,258,621		18,412,595		18,471,175		18,627,911
Noncontrolling interests		4,469,309		4,391,806		4,326,703		4,135,338		4,033,313
Total equity		22,686,940		22,650,427		22,739,298		22,606,513		22,661,224
Total liabilities, noncontrolling interests, and equity		$  38,488,128		$  37,847,865		$  37,699,046		$  36,771,402		$ 36,783,293

 

Funds From Operations and Funds From Operations per Share September 30, 2024 (In thousands)

The following table presents a reconciliation of net income (loss) attributable to Alexandria's common stockholders, the most directly comparable financial measure presented in accordance with U.S. generally accepted accounting principles ("GAAP"), including our share of amounts from consolidated and unconsolidated real estate joint ventures, to funds from operations attributable to Alexandria's common stockholders – diluted, and funds from operations attributable to Alexandria's common stockholders – diluted, as adjusted, for the periods below:

		Three Months Ended										Nine Months Ended
		9/30/24		6/30/24		3/31/24		12/31/23		9/30/23		9/30/24		9/30/23
Net income (loss) attributable to Alexandria's common stockholders – basic and diluted		$   164,674		$     42,917		$   166,886		$   (91,927)		$     21,855		$   374,477		$   184,371
Depreciation and amortization of real estate assets		291,258		288,118		284,950		281,939		266,440		864,326		798,590
Noncontrolling share of depreciation and amortization from consolidated real     estate JVs		(32,457)		(31,364)		(30,904)		(30,137)		(28,814)		(94,725)		(85,212)
Our share of depreciation and amortization from unconsolidated real estate JVs		1,075		1,068		1,034		965		910		3,177		2,624
Gain on sales of real estate		(27,114)		—		(392)		(62,227)		—		(27,506)		(214,810)
Impairment of real estate – rental properties and land		5,741	(1)	2,182		—		263,982		19,844		7,923		186,446
Allocation to unvested restricted stock awards		(2,908)		(1,305)		(3,469)		(2,268)		(838)		(7,657)		(3,050)
Funds from operations attributable to Alexandria's common stockholders –     diluted(2)		400,269		301,616		418,105		360,327		279,397		1,120,015		868,959
Unrealized (gains) losses on non-real estate investments		(2,610)		64,238		(29,158)		(19,479)		77,202		32,470		220,954
Impairment of non-real estate investments		10,338	(3)	12,788		14,698		23,094		28,503		37,824		51,456
Impairment of real estate		—		28,581		—		7,908		805		28,581		2,778
Acceleration of stock compensation expense due to executive officer resignations		—		—		—		18,436		1,859		—		1,859
Allocation to unvested restricted stock awards		(125)		(1,738)		247		(472)		(1,330)		(1,640)		(3,503)
Funds from operations attributable to Alexandria's common stockholders –     diluted, as adjusted		$   407,872		$   405,485		$   403,892		$   389,814		$   386,436		$  1,217,250		$  1,142,503

Refer to "Definitions and reconciliations" in the Supplemental Information for additional details.
(1)	Primarily to reduce the carrying amount of one property in Canada that continued to meet the held-for-sale classification to the sales price under negotiation with a potential buyer less costs to sell.
(2)	Calculated in accordance with standards established by the Nareit Board of Governors.
(3)	Primarily related to two non-real estate investments in privately held entities that do not report NAV.

 

Funds From Operations and Funds From Operations per Share (continued) September 30, 2024 (In thousands, except per share amounts)

The following table presents a reconciliation of net income (loss) per share attributable to Alexandria's common stockholders, the most directly comparable financial measure presented in accordance with GAAP, including our share of amounts from consolidated and unconsolidated real estate joint ventures, to funds from operations per share attributable to Alexandria's common stockholders – diluted, and funds from operations per share attributable to Alexandria's common stockholders – diluted, as adjusted, for the periods below. Per share amounts may not add due to rounding.

		Three Months Ended										Nine Months Ended
		9/30/24		6/30/24		3/31/24		12/31/23		9/30/23		9/30/24		9/30/23
Net income (loss) per share attributable to Alexandria's common stockholders –     diluted		$         0.96		$         0.25		$         0.97		$        (0.54)		$         0.13		$         2.18		$         1.08
Depreciation and amortization of real estate assets		1.51		1.50		1.48		1.48		1.40		4.49		4.19
Gain on sales of real estate		(0.16)		—		—		(0.36)		—		(0.16)		(1.26)
Impairment of real estate – rental properties and land		0.03		0.01		—		1.54		0.12		0.05		1.09
Allocation to unvested restricted stock awards		(0.01)		(0.01)		(0.02)		(0.01)		(0.01)		(0.05)		(0.01)
Funds from operations per share attributable to Alexandria's common    stockholders – diluted		2.33		1.75		2.43		2.11		1.64		6.51		5.09
Unrealized (gains) losses on non-real estate investments		(0.02)		0.37		(0.17)		(0.11)		0.45		0.19		1.29
Impairment of non-real estate investments		0.06		0.08		0.09		0.13		0.17		0.22		0.30
Impairment of real estate		—		0.17		—		0.05		—		0.17		0.02
Acceleration of stock compensation expense due to executive officer resignations		—		—		—		0.11		0.01		—		0.01
Allocation to unvested restricted stock awards		—		(0.01)		—		(0.01)		(0.01)		(0.01)		(0.02)
Funds from operations per share attributable to Alexandria's common    stockholders – diluted, as adjusted		$         2.37		$         2.36		$         2.35		$         2.28		$         2.26		$         7.08		$         6.69
Weighted-average shares of common stock outstanding – diluted		172,058		172,013		171,949		171,096		170,890		172,007		170,846
Refer to "Definitions and reconciliations" in the Supplemental Information for additional details.

 

View original content to download multimedia:https://www.prnewswire.com/news-releases/alexandria-real-estate-equities-inc-reports-3q24-and-ytd-3q24-net-income-per-share--diluted-of-0-96-and-2-18--respectively-and-3q24-and-ytd-3q24-ffo-per-share--diluted-as-adjusted-of-2-37-and-7-08--respectively-302282138.html

SOURCE Alexandria Real Estate Equities, Inc.

FAQ

What was Alexandria Real Estate Equities' net income per share for 3Q24?

Alexandria Real Estate Equities reported a net income per diluted share of $0.96 for 3Q24.

How much did Alexandria Real Estate Equities' total revenues increase in 3Q24?

Total revenues increased by 10.9% to $791.6 million for 3Q24.

What is Alexandria Real Estate Equities' dividend yield as of 3Q24?

The dividend yield is 4.4% as of 3Q24.

What liquidity does Alexandria Real Estate Equities have?

Alexandria Real Estate Equities has significant liquidity of $5.4 billion.

What are the expected incremental annual net operating income figures for Alexandria Real Estate Equities?

The expected incremental annual net operating income is $510 million by 1Q28.